Legacy technology is an age-old problem in financial services. However, with upstart online banks and fintech companies using real-time data to lure customers away with just the right offer or superior experience, legacy technology environments are giving financial services organizations a new (and sizeable) data headache.
Complex Hybrid Environments Can Block Data Access
Complete data is the key to unlocking customer data insights, increasing speed-to-market for new products, and making faster, well-informed business decisions. Unfortunately, technical teams often struggle to unlock valuable data when a company relies on legacy systems, such as mainframes or on-premises databases.
Problems with data integration friction are often counterintuitively compounded by modern “enabling” technologies, such as cloud computing. Combining new infrastructure with legacy technology results in a patchwork environment with siloed data stored across multiple systems in different formats.
According to our recent research, 57% of data leaders and practitioners in the financial services industry (51% across all industries) say data in legacy systems is hard to access for cloud analytics, so they often “don’t bother” to include it when creating data pipelines. This is a risky strategy, given legacy systems hold decades of valuable business and customer insights, which could provide a competitive advantage over newer digital players.
Lack of Data Visibility Creates Risk
Lack of data access can also create compliance and cybersecurity risks. In today’s ever-evolving regulatory environment, financial services firms need unprecedented visibility over their data to comply with new regulations. In addition to stringent customer protection regulations, such as the EU Payment Services Directive (PSD2), firms increasingly need to meet sustainability reporting requirements.
For example, regulations such as the FCA’s Sustainability Disclosure Requirements in the UK – which will make reporting on Scope 3 emissions compulsory for the first time – require organizations to build updated data pipelines to keep pace with new ESG regulatory rules. With other countries following suit, financial services organizations must arm themselves with data to adapt quickly to these changes. Facing risks of steep fines or reputational damage because of non-compliance, organizations may quickly find that data integration friction is a costly problem.
Keeping Pace With Data Demand
Technical teams within financial services organizations are also under enormous pressure to provide data and real-time analytics to different departments. More than half (54%) of customer services, sales & marketing, and accounting & finance teams request data at least weekly, with other groups, such as admin & operations and senior leadership not far behind. But held back by complex ecosystems of inconsistent data formats and legacy systems, teams are struggling to access the data the business so desperately needs. In fact, two-thirds (66%) of respondents say this data complexity and friction can have a crippling impact on digital transformation.
Laying the Right Data Foundations
The message is clear: traditional financial services organizations can only keep pace with the competition and stay on top of compliance requirements if they solve the problem of data integration friction. Firms need to take urgent steps to build solid data foundations and reduce the workload on technical teams by empowering business units and end users to do more.
To learn more about these data pipeline challenges in the financial services industry, download our report.